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This is a ten question multiple-choice quiz covering the material in this Unit. I hope you do well!

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Question 1 of 10

1. Question

10 points

When a rational person acting voluntarily chooses to engage in an activity (enroll in school, buy a product, start a business, etc.), (s)he does so expecting that:

the marginal benefit from the activity is greater than the marginal cost.

the marginal cost from the activity is greater than the marginal benefit.

the nominal value of the activity is greater than the real value.

the real value of the activity is greater than the nominal value.

Correct

Incorrect

Question 2 of 10

2. Question

10 points

If a country uses its resources as efficiently as possible (no unemployment, no idle machines and factories), then it is operating:

On the production possibilities curve.

Inside (to the left of) the production possibilities curve.

Outside (to the right of) the production possibilities curve.

At the intersection of the real and nominal price curves.

Correct

Incorrect

Question 3 of 10

3. Question

10 points

Consider the production possibilities curve model. Let’s say that a country increased its production of all goods and services since last year. If last year the country was producing on the curve, what must have happened?

The curve must have shifted out because of increases in resources or advances in technology.

We must have moved from a point inside the curve (last year) to a point on the curve (this year).

Because the curve itself cannot shift, we must have moved to a point beyond (outside of) the curve this year.

The curve must have moved inward (to the left) since last year.

Correct

Incorrect

Question 4 of 10

4. Question

10 points

Which of the following is not a condition for strong economic growth, as listed in Unit 1 of our text?

7. Question

10 points

Due to the influences of John Maynard Keynes, many countries around the world decided to increase the role of the government in their economies. Countries with a combination of private sector and considerable government influence are called:

Mixed economies

Command economies

Combination economies

Laissez-faire economies

Correct

Incorrect

Question 8 of 10

8. Question

10 points

In which of the following scenario is the inflation rate 4%?

The real interest rate is 3% and the nominal interest rate is 7%

The real interest rate is 7% and the nominal interest rate is 3%

The real interest rate is -2% and the nominal interest rate is 6%

The real interest rate is 4% and the nominal interest rate is 1%

Correct

Incorrect

Question 9 of 10

9. Question

10 points

Which of the following is a normative statement?

We should have more government spending in order to have more money for education

If our government spends more money on education, then it will create more jobs in this industry

If our government raises tax rates, then it will increase its tax revenue and therefore we will have more money available for education

The current rate of inflation in India is -5% (negative 5 percent)

Correct

Incorrect

Question 10 of 10

10. Question

10 points

An economist proposes to eliminate our current income tax system (taxes collected from everyone’s paychecks). Instead she wants to have only a consumption tax system (sales taxes collected on purchases of goods and services). One advantage, she mentions, is that a consumption tax system is easy to implement because businesses will simply transmit taxes to the government and people will no longer have to complete a tax return at the end of the year. An opponent to this proposal states that this would raise unemployment in the country as many accountants, tax advisers, government tax collectors, etc. would lose their job.
As a critically thinking economist, what should be your response to the opponent’s comment?

Many accountants, tax advisers, auditors, etc. will lose their jobs, but the savings by households from not having to pay for these financial services will allow them to spend money on other things (electronics, housing, cars, etc.) and thus overall unemployment will not increase.

Accountants, tax advisers, auditors, etc. will lose their jobs and overall unemployment will increase, but inflation will decrease because of the tax savings, so there will be a trade-off.

Accountant, tax advisers, auditors, etc. will not lose their jobs because even in a consumption tax system households will still need these services as they will still need complete some forms for income tax reporting services.

Overall unemployment will increase not because accountants, tax advisers, auditors, etc. lose their jobs, but because our government will end up collecting more money in taxes from a consumption tax and overall savings will go down, and this will slow down overall economic activity.